Friday, August 19, 2005
Health Insurance Costs Slowing Start-ups?
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From USA Today:
The article begins by talking about Jeff Kushner being ready to start a new company to help families fight "cybercrime."
But Kushner, recently laid off from a tech job, is such a reluctant entrepreneur that he's only committing to self-employment for six months while he continues job hunting. Why? It's going to cost him $1,145 a month for health insurance for himself, his wife and two kids.
It goes on to say that because of the costs of proper health insurand for the self employed, many people are opting to work for large companies, which some people believe stifles growth and innovation.
That's worrisome because start-ups and other small firms have historically created most innovations and as much as 75% of new jobs. In Cincinnati, for example, health costs have slowed Wendy Hunt and her husband, Brian Germ, from starting a dog day care business that would employ up to 10 workers.
That may not sound like much. But multiplied across thousands of start-ups, these new jobs would replace many lost when mature companies such as Eastman Kodak and Hewlett-Packard are slashing payrolls.
Some experts, however, beg to differ:
Princeton economist Harvey Rosen and other researchers reached the opposite conclusion, however. They did not find a link when they examined the matter more than a decade ago. Their 1994 research noted that entrepreneurs by definition are risk takers. Many are willing to fly without a health safety net, they said.
It is my humble opinion that this giant "problem" is simply a matter of perception. Whether you are on your company's group health insurance plan or you pay out of pocket for an individual health insurance policy, we all pay for our health insurance coverage. The money that an employer spends to insure an employee is money that the employee won't be taking home as pay, but since the money was never in the employee's pocket to begin with, it doesn't seem like a loss.
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